Supreme Court Orders Perjury Case for Fabricated Evidence in Tenancy Dispute: New Era Fabrics Ltd. vs. Bhanumati Keshrichand Jhaveri (2020)

Date of the Judgment: March 03, 2020

Citation: (2020) INSC 195

Judges: Justice Mohan M. Shantanagoudar and Justice R. Subhash Reddy

Can a company be prosecuted for perjury for submitting tampered documents to the Supreme Court? The Supreme Court recently addressed this question in a case involving a tenancy dispute where the tenant was accused of altering financial records. The court examined whether the company had fabricated evidence during the Special Leave Petition (SLP) proceedings. The bench comprised Justice Mohan M. Shantanagoudar and Justice R. Subhash Reddy.

Case Background

The respondents (plaintiffs) claimed to be the lessors of a property in Mumbai, while the petitioner (defendant), M/s New Era Fabrics Ltd., was their monthly tenant. The respondents terminated the tenancy on February 11, 2009, and filed a suit in the Court of Small Causes, Mumbai, seeking possession and an injunction. The respondents argued that the petitioner, a public limited company with a paid-up share capital of over ₹1 crore, was not protected under the Maharashtra Rent Control Act, 1999.

The petitioner contended that its paid-up share capital was ₹1,03,64,000 as of February 2007, but it had reduced it to ₹93,74,000 on March 1, 2007, thus falling under the protection of the Maharashtra Rent Control Act, 1999. This led to a preliminary issue regarding the Trial Court’s jurisdiction.

The respondents relied on the petitioner’s income tax return for the assessment year 2008-2009 (financial year 2007-2008), which showed a paid-up share capital of ₹1,03,64,000 as of the tenancy termination date. The petitioner filed a revised return on April 4, 2009, showing a reduced share capital of ₹93,74,000.

The petitioner claimed that the share capital was reduced through a buy-back of shares on March 1, 2007. The company’s director, internal auditor, and statutory auditor testified that the share capital for the financial year 2007-2008 was ₹93,74,000. However, the Trial Court rejected these claims, citing discrepancies in the evidence, particularly in the audit report and balance sheet dated September 19, 2008.

Timeline

Course of Proceedings

The Trial Court rejected the Petitioner’s claim of reduced share capital, finding discrepancies in the evidence and concluding that the buy-back of shares was improbable. The court noted that the electronic returns regarding the buy-back were filed late, and there was a significant discrepancy in the audit report and balance sheet. Specifically, the weighted average number of shares in the balance sheet was the same for both financial years 2006-2007 and 2007-2008, despite the claimed reduction in share capital. The Trial Court concluded that the actual paid-up share capital of the Petitioner as of the tenancy termination date was ₹1,03,64,000, thus giving the Trial Court jurisdiction.

The Court of Small Causes (Appellate Bench) affirmed the Trial Court’s findings. The High Court also dismissed the revisional application filed by the Petitioner. Subsequently, the Supreme Court dismissed the Special Leave Petition (SLP) filed by the Petitioner on April 9, 2018.

Legal Framework

This case primarily involves the following legal provisions:

• Section 340 of the Criminal Procedure Code, 1973 (CrPC): This section deals with the procedure for complaints regarding offences mentioned in Section 195 of the CrPC. It allows a court to initiate an inquiry into offences like perjury if it appears that such an offence has been committed in relation to a proceeding in that court.
• Section 195(1)(b) of the CrPC: This section states that no court shall take cognizance of any offence punishable under Sections 193 to 196 (including perjury) of the Indian Penal Code, 1860, when such offence is alleged to have been committed in, or in relation to, any proceeding in any court, except on the complaint in writing of that court.
• Section 3(1)(b) of the Maharashtra Rent Control Act, 1999: This provision states that the Act shall not apply to premises let or sub-let to private limited and public limited companies having a paid-up share capital of more than one crore rupees.

Arguments

Applicant’s (Respondent No. 4) Arguments:

• The applicant argued that the petitioner deliberately made false interpolations in the auditor’s report and balance sheet dated September 19, 2008, before submitting these documents to the Supreme Court.
• The applicant contended that the paid-up share capital of the petitioner was shown as ₹1,03,64,000 as on March 31, 2007, and ₹93,74,000 as on March 31, 2008, in the version filed before the Trial Court.
• The applicant pointed out that the number of weighted average shares and the earnings per share (EPS) for the financial year 2007-2008 should have been computed based on the reduced share capital, but the balance sheet showed the same number of weighted average shares as the previous year.
• The applicant highlighted that the words ‘Weighted Average’ were crossed out and ‘as on 1/4/07’ was added by hand in the balance sheet submitted to the Supreme Court.
• The applicant argued that this manipulation was done to mislead the Supreme Court, as the original balance sheet did not contain these handwritten changes.

Petitioner’s (Non-Applicant) Arguments:

• The petitioner argued that the auditor’s report and balance sheet dated September 19, 2008, were exhibited multiple times as part of the evidence.
• The petitioner stated that a certified copy of Exhibit 13 (the auditor’s report and balance sheet) showed that the words ‘Weighted average’ had been crossed out, and ‘as on 1/4/07’ was added by hand.
• The petitioner contended that the handwritten corrections were present from the beginning of the trial and that the applicant should have raised any concerns about forgery at the trial stage.
• The petitioner argued that its advocate did not rely on Column 12 of the balance sheet while arguing the SLP before the Supreme Court, and therefore, the contents of Column 12 had no bearing on the dismissal of the SLP.

Submissions Table

Issues Framed by the Supreme Court

• Whether a prima facie case is made out that the Petitioner has fabricated evidence for the purpose of the SLP proceedings before this Court.
• Whether a prima facie case is also made out against Mr. R.K. Agarwal, for having sworn in his affidavit before this Court as to the veracity of the facts stated and documents filed in SLP (Civil) No. 3309/2018.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the finding that the Petitioner had altered the balance sheet submitted to the Court. The Court emphasized that the handwritten modification in Column 12 of the balance sheet was a significant deviation from the original document. The Court also noted that the petitioner’s explanation for the discrepancy was not convincing.

The Court found it significant that the handwritten modifications appeared for the first time in the documents filed before the Supreme Court, and not in the original documents exhibited before the Trial Court. The Court also noted that the petitioner’s advocate did not rely on the altered column while arguing the SLP, which further supported the conclusion that the document was altered specifically for the SLP proceedings.

The Court also considered the fact that Mr. R.K. Agarwal had sworn an affidavit before the Supreme Court verifying the facts and documents, despite relying on the original auditor’s report in his Trial Court testimony. The Court concluded that this made out a prima facie case against him as well.

The Court rejected the petitioner’s argument that the handwritten corrections were present from the beginning of the trial, finding that the certified copies produced by the petitioner were unreliable. The Court observed that the petitioner had altered the words ‘Weighted average number of Equity Shares’ to ‘number of Equity Shares as on 1/4/07’ by hand, which indicated an attempt to mislead the Court.

The Court did not comment in detail upon the intention behind making the interpolations, but focused on the fact that a prima facie case was made out that the petitioner had fabricated evidence for the purpose of the SLP proceedings. The Court also found that a prima facie case was made out against Mr. R.K. Agarwal for having sworn in his affidavit as to the veracity of the facts stated and documents filed in the SLP.

The Court quoted from the judgment: “From the above discussion, it is evident that the handwritten modification made by the Petitioner in Column 12 of the balance sheet dated 19.09.2008 is a significant alteration from the terms as used in the original document.”

The Court further stated: “Hence we find that a prima facie case is made out that the Petitioner has fabricated evidence for the purpose of the SLP proceedings before this Court.”

The Court also stated: “We further find that prima facie case is also made out against Mr. R.K. Agarwal, for having sworn in his affidavit before this Court as to the veracity of the facts stated and documents filed in SLP (Civil) No. 3309/2018, even though he had relied upon the original auditor’s report, which did not contain any handwritten interpolation, in his evidence before the Trial Court.”

Key Takeaways

• Submitting fabricated evidence to the Supreme Court can lead to perjury charges.
• Courts will scrutinize documents carefully and compare them with original records.
• Individuals verifying documents must ensure their accuracy.
• Companies must maintain accurate financial records and avoid making false representations.
• This case sets a precedent for strict action against those who attempt to mislead the court.

Directions

The Supreme Court directed the Secretary General of the Court to depute an officer of the rank of Deputy Registrar or above to file a complaint under Sections 193 and 199 of the Indian Penal Code, 1872 against the Petitioner Company and Mr. R.K. Agarwal before a Magistrate of competent jurisdiction at Delhi. The officer was directed to ensure that requisite action is taken for prosecuting the complaints.

Development of Law

The ratio decidendi of this case is that a party can be prosecuted for perjury if it is found to have submitted fabricated evidence before the Supreme Court. This judgment reinforces the importance of maintaining the integrity of the judicial process and sets a precedent for strict action against those who attempt to mislead the court. There is no change in the previous position of law, but it clarifies the consequences of submitting fabricated evidence.

Conclusion

The Supreme Court allowed the application for perjury, finding that M/s New Era Fabrics Ltd. had fabricated evidence by altering a balance sheet submitted during SLP proceedings. The Court directed the filing of a criminal complaint against the company and its director, Mr. R.K. Agarwal, for perjury. This judgment underscores the importance of honesty and integrity in legal proceedings and sets a strong precedent against the submission of fabricated evidence.